H. B. 4496
(By Mr. Speaker, (Mr. Thompson) and Delegate Armstead)
[By Request of the Executive]
[Introduced February 11, 2008; referred to the
Committee on Pensions and Retirement then Finance.]
A BILL to repeal §18-7C-1, §18-7C-2, §18-7C-3, §18-7C-4, §18-7C-5,
§18-7C-6, §18-7C-7, §18-7C-8, §18-7C-9, §18-7C-10, §18-7C-11,
§18-7C-12, §18-7C-13, and §18-7C-14 of the Code of West
Virginia, 1931, as amended; to amend and reenact §18-7A-14 of
said code; and to amend said code by adding thereto a new
article, designated §18-7D-1, §18-7D-2, §18-7D-3, §18-7D-4,
§18-7D-5, §18-7D-6, §18-7D-7, §18-7D-8, §18-7D-9 §18-7D-10,
and §18-7D-11, all relating to the State Teachers Retirement
System and the Teachers Defined Contribution System generally;
relating to the voluntary transfer of assets from the Teachers
Defined Contribution Retirement System to the State Teachers
Retirement System; providing legislative findings and purpose;
providing definitions; providing for election on the question
of actively contributing members of the Teachers Defined
Contribution Retirement System voluntarily transferring assets to the State Teachers Retirement System; setting forth
requirements of election; providing responsibilities of the
Consolidated Public Retirement Board; setting forth dates and
time periods for transition and election; providing for
education about election and transfer; requiring legal notice
to members; allowing Consolidated Public Retirement Board to
contract directly for professional services for purposes of
performing its responsibilities related to the voluntary
transfer and conducting the election; permitting only one
election; providing for voluntary transfer from the Teachers
Defined Contribution Retirement System to the State Teachers
Retirement System upon affirmative vote by seventy percent or
more of the actively contributing members; providing for
transfer of assets from the Teachers Defined Contribution
Retirement System to the State Teachers Retirement System upon
favorable vote; providing for service credit in the State
Teachers Retirement System; permitting transferring members to
pay an Actuarial Reserve in order to receive full credit upon
transfer; addressing withdrawals and cash outs; addressing
qualified domestic relations orders; providing for vesting of
members and minimum guarantees of benefits for them; and
providing for due process and right to appeal.
Be it enacted by the Legislature of West Virginia:
That §18-7C-1, §18-7C-2, §18-7C-3, §18-7C-4, §18-7C-5, §18-7C-6, §18-7C-7, §18-7C-8, §18-7C-9, §18-7C-10, §18-7C-11, §18-7C-12,
§18-7C-13, and §18-7C-14 of the Code of West Virginia, 1931, as
amended, be repealed; that §18-7A-14 of said code be amended and
reenacted; and that said code be amended by adding thereto a new
article, designated §18-7D-1, §18-7D-2, §18-7D-3, §18-7D-4, §18-7D-
5, §18-7D-6, §18-7D-7, §18-7D-8, §18-7D-9, §18-7D-10, and §18-7D-
11, all to read as follows:
ARTICLE 7A. STATE TEACHERS RETIREMENT SYSTEM.
§18-7A-14. Contributions by members; contributions by employers.
(a) At the end of each month every member of the retirement
system shall contribute six percent of that member's monthly gross
salary to the retirement board:
Provided, That any member employed
by a state institution of higher education shall contribute on the
member's full earnable compensation, unless otherwise provided in
section fourteen-a of this article. The sums are due the Teachers
Retirement System at the end of each calendar month in arrears and
shall be paid not later than fifteen days following the end of the
calendar month. Each remittance shall be accompanied by a detailed
summary of the sums withheld from the compensation of each member
for that month on forms, either paper or electronic, provided by
the Teachers Retirement System for that purpose.
(b) Annually, the contributions of each member shall be
credited to the member's account in the Teachers Retirement System
Fund. The contributions shall be deducted from the salaries of the members as prescribed in this section and every member shall be
considered to have given consent to the deductions. No deductions,
however, shall be made from the earnable compensation of any member
who retired because of age or service and then resumed service
unless as provided in section thirteen-a of this article.
(c) The aggregate of employer contributions, due and payable
under this article, shall equal annually the total deductions from
the gross salary of members required by this section. Beginning the
first day of July, one thousand nine hundred ninety-four, the rate
shall be seven and one-half percent; beginning on the first day of
July, one thousand nine hundred ninety-five, the rate shall be nine
percent; beginning on the first day of July, one thousand nine
hundred ninety-six, the rate shall be ten and one-half percent;
beginning on the first day of July, one thousand nine hundred
ninety-seven, the rate shall be twelve percent; beginning on the
first day of July, one thousand nine hundred ninety-eight, the rate
shall be thirteen and one-half percent; and beginning on the first
day of July, one thousand nine hundred ninety-nine and thereafter,
the rate shall be fifteen percent:
Provided, That the rate shall be
seven and one-half percent for any individual who becomes a member
of the Teachers Retirement System for the first time on or after
the first day of July, two thousand five, or any individual who
becomes a member of the Teachers Retirement System as a result of
the
merger voluntary transfer contemplated in article
seven-c seven-d of this chapter.
(d) Payment by an employer to a member of the sum specified in
the employment contract minus the amount of the employee's
deductions shall be considered to be a full discharge of the
employer's contractual obligation as to earnable compensation.
(e) Each contributor shall file with the retirement board or
with the employer to be forwarded to the retirement board an
enrollment form showing the contributor's date of birth and other
data needed by the retirement board.
ARTICLE 7D. VOLUNTARY TRANSFER FROM TEACHERS' DEFINED CONTRIBUTION
RETIREMENT SYSTEM TO STATE TEACHERS RETIREMENT
SYSTEM.
§18-7D-1. Legislative findings and purpose.
(
a) The Legislature hereby finds and declares as follows:
(1) That the quality of our state's education system is
largely dependent upon the quality of its teachers and educational
service personnel;
(2) That many West Virginia teachers and education service
personnel who currently are members of the Teachers' Defined
Contribution Retirement System desire to join a defined benefit
system, which relieves participants of bearing the risk of
investment performance and offers the security of providing
participants with advanced knowledge of their anticipated
retirement benefit;
(3) That other members of the Teachers' Defined Contribution
Retirement System remain comfortable with bearing the attendant
market risks and performance of their investements associated with
managing the individual retirement accounts of that system;
(4)
That it is in the best interests of the teachers and
education service personnel in this state, as well as our system of
public education as a whole, to permit members of the Teachers'
Defined Contribution Retirement System to voluntarily elect
membership in the State Teachers Retirement System pursuant to the
provisions of this article; and
(5) That the prudent and fiscally sound management of the
State Teachers Retirement System
necessitates that a
sufficient
number of members of the Teachers' Defined Contribution Retirement
System
elect to voluntarily transfer their assets to the State
Teachers Retirement System
in accordance with the provisions of
this article.
§18-7D-2. Definitions.
As used in this article, unless the context clearly requires
a different meaning:
(1) "Actuarial Reserve" means the Actuarial Reserve Lump Sum
Value of the additional service credit being purchased by a member
so electing in accordance with the provisions of section seven of
this article.
(2) "Actuarial Reserve Adjusted Salary" means either:
(A) for a member with a full year service credit in the fiscal
year ending the thirtieth day of June, two thousand seven, the
member's two thousand seven fiscal year salary increased by seven
percent;
(B) for a member with less than a full year service credit in
the fiscal year ending the thirtieth day of June, two thousand
seven, the member's two thousand seven fiscal year salary
annualized to a full year based on the partial year service credit
increased by seven percent; or
(C) for a member without service credit in the fiscal year
ending the thirtieth day of June, two thousand seven, the member's
annualized contract salary in effect on the thirty-first day of
December, two thousand seven increased by seven percent.
(3) "Actuarial Reserve Benefit Date" means the first day of
the month coincident with or next following the date at which the
member attains the age of sixty, or the thirtieth day of June, two
thousand nine, whichever is later.
(4) "Actuarial Reserve Benefit Date Factors" mean the
actuarial lump sum value factors based on a life only annuity
starting on the Actuarial Reserve Benefit Date applying the 1983
Group Annuity Mortality Tables on a seventy-five percent female and
a twenty-five percent male blended Unisex basis and interest at
seven and one-half percent.
(5) "Actuarial Reserve Discount Factor" means the annual discount factor applied for the period between the thirtieth day of
June, two thousand nine and the Actuarial Reserve Benefit Date, if
any. Such factor based on the State Teachers Retirement System
actuarial valuation assumptions shall estimate the impact of
mortality, disability, and economic factors for such discount
period by application of a net four percent discount rate.
(6) "Actuarial Reserve Lump Sum Value" means a single sum
amount calculated as: A benefit of two percent multiplied by the
twenty-five percent of the Defined Contribution Retirement System
service credit being purchased multiplied by the Actuarial Reserve
Adjusted Salary; such benefit multiplied by the Actuarial Reserve
Benefit Date Factors to determine the lump sum value multiplied by
the Actuarial Reserve Discount Factor.
(7) "Assets" means all member contributions and employer
contributions made on the member's behalf to the Defined
Contribution Retirement System and earnings thereon, less any
applicable fees as approved by the board: Provided, That if a
member has withdrawn or cashed out any amounts, the amounts must
have been repaid.
(8) "Board" means the Consolidated Public Retirement Board
established in article ten-d, chapter five of this code, and its
employees.
(9) "Date of transfer" means, in the event that seventy
percent or more of the actively contributing members of the Defined Contribution Retirement System voluntarily elect to transfer their
assets to the State Teachers Retirement System, the first day of
July, two thousand eight.
(10) "Defined Contribution Retirement System" means the
Teachers' Defined Contribution Retirement System established in
article seven-b of this chapter.
(11) "Salary" means:
(A) For a member contributing to the Defined Contribution
Retirement System during the two thousand seven fiscal year, the
actual salary earned for the two thousand seven fiscal year divided
by the employment service earned in the two thousand seven fiscal
year.
(B) For a member not contributing to the Defined Contribution
Retirement System during the two thousand seven fiscal year, the
contract salary on the date of rehire.
(12) "State Teachers Retirement System" means the State
Teachers Retirement System established in article seven-a of this
chapter.
§18-7D-3. Election; board may contract for professional services.
(a) The board shall arrange for and hold an election for the
actively contributing members of the Defined Contribution
Retirement System who are eligible to vote, pursuant to the
provisions of subsection (b) of this section, on the issue of
voluntarily transferring their assets from the Defined Contribution Retirement System to the State Teachers Retirement System.
(b) Any person who was actively contributing to the Defined
Contribution Retirement System on the last day of December, two
thousand seven, shall be eligible to vote in the election.
(c) The board may retain the services of professionals it
deems necessary to:
(1) Assist in the preparation of educational materials to
inform actively contributing members of the Defined Contribution
Retirement System of their options in the election;
(2) Assist in the educational process of the members who are
eligible to vote on the voluntary transfer;
(3) Assist in the election process and the election; and
(4) Ensure compliance with all relevant state and federal
laws.
(d) Due to the time constraints inherent in the election and
transfer processes set forth in this article in specific, and due
to the nature of the professional services required by the
Consolidated Public Retirement Board in general, the provisions of
article three, chapter five-a of this code, shall not apply to any
contracts for any actuarial services, investment services, legal
services or other professional services and materials authorized
under the provisions of this article.
(e) The election may be held through certified mail or in any
other method the board determines is in the best interest of the members. Each ballot shall contain the following language, in bold
fifteen-point type: "By casting this ballot I am making an
educated, informed and voluntary choice as to my retirement and the
retirement system of which I wish to be a member. I am also
certifying that I understand the consequences of my vote in this
election." Each ballot shall be signed by the member voting. The
board shall retain the ballots in a permanent file. Any unsigned
ballot is void.
(f) The election period shall begin not later than the first
day of May, two thousand eight. The board shall ascertain the
results of the election not later than the twenty-third day of May,
two thousand eight. The board shall certify the results of the
election to the members, the Governor, and the Legislature not
later than the fifth day of June, two thousand eight.
(g) The election period terminates and votes may not be cast
or counted after the twelfth day of May, two thousand eight, unless
the election is conducted through the United States mail. If
conducted through the mail, any ballot postmarked later than the
twelfth day of May, two thousand eight, is void and may not be
counted.
(h) Only one election may be held pursuant to the provisions
of this article.
§18-7D-4. Notice, education, record-keeping requirements.
(a) Commencing upon the effective date of this article, the board shall begin an educational program regarding the voluntary
transfer of assets from the Defined Contribution Retirement System
to the State Teachers Retirement System.
(1) This educational program shall address, at a minimum:
(A) The law providing for the voluntary transfer;
(B) The mechanics of the voluntary transfer;
(C) The election process;
(D) Relevant dates and time periods;
(E) The benefits, potential advantages and potential
disadvantages if less than seventy percent of actively contributing
members approve the voluntary transfer and thereby elect to remain
in the Defined Contribution Retirement System;
(F) The benefits, potential advantages and potential
disadvantages of becoming a member of the State Teachers Retirement
System;
(G) Potential state and federal tax implications attendant to
the various options available to the members; and
(H) Any other pertinent information considered relevant by the
board.
(2) The board shall disseminate the information through:
(A) Its website;
(B) Computer programs;
(C) Written or electronic materials, or both, delivered to
each member;
(D) Classes or seminars, if in the best judgment of the board
classes or seminars are required to provide the necessary education
for a member to make an informed decision with respect to the
election;
(E) At the discretion of the board, through a program of
individual counseling which is optional on the part of the member;
and
(F) Through any other educational program considered necessary
by the board.
(b) The board shall provide each actively contributing member
with a copy of the written or electronic educational materials and
with a copy of the notice of the election.
(1) The notice shall provide full and appropriate disclosure
regarding the voluntary transfer and the election process,
including the date of the election.
(2) The board also shall cause notice of the election to be
published in at least ten newspapers of general circulation in this
state. This notice shall be:
(A) By Class III legal advertisement published in accordance
with the provisions of article three, chapter fifty-nine of this
code; and
(B) Published not later than thirty days prior to the
beginning of the election period and not sooner than sixty days
prior to the beginning of the election period pursuant to section three of this article.
(c) It is the responsibility of each member of the Defined
Contribution Retirement System to keep the board informed of his or
her current address. A member who does not is considered to have
waived his or her right to receive any information from the board
with respect to the purposes of this article.
(d) Once the board has complied with the provisions of this
section, each actively contributing member of the Defined
Contribution Retirement System is considered to have actual notice
of the election and all matters pertinent to the election.
§18-7D-5. Election results.
(a) If seventy percent or more of the actively contributing
members vote in the affirmative on the issue:
(1) The board shall transfer all assets held by each member
voting in the affirmative in the Defined Contribution Retirement
System's Trust Fund to the State Teachers Retirement System; and
(2) Effective on the date of transfer, each transferring
member shall become a member of and entitled to the benefits of the
State Teachers Retirement System and shall thereafter be governed
by the provisions of article seven-a of this chapter, subject to
the provisions of this article.
(3) Any member who voted against the voluntary transfer or who
failed to vote on the issue in the election held pursuant to
section three of this article shall remain a member of the Defined Contribution Retirement System and shall continue to be governed by
the provisions of article seven-b of this chapter. All assets held
by each member voting against the voluntary transfer and each
member failing to vote on the issue shall remain in the Defined
Contribution Retirement System's Trust Fund.
(4) Notwithstanding any other provision of this code to the
contrary, the board may do all things necessary and convenient to
maintain the Defined Contribution Retirement System and the State
Teachers Retirement System during the transitional period between
the election and one year after the date of transfer and may retain
the services of the professionals it considers necessary to do so.
(b) The election is considered final and each member, whether
he or she voted or failed to vote, is bound by the results of the
election. Each member is considered to have made an informed,
educated, knowing and voluntary decision and choice with respect to
the election. Those members who failed or refused to vote are also
considered to have made an informed, educated, knowing and
voluntary decision and choice with respect to the election and
voting and are bound by the results of the election as if he or she
had voted in the election.
§18-7D-6. Service credit in State Teachers Retirement System
following transfer; conversion of assets;
adjustments
.
(
a) Any member transferring all of his or her assets from the Defined Contribution Retirement System to the State Teachers
Retirement System pursuant to the provisions of this article and
who has not made any withdrawals or cash-outs from his or her
assets is entitled to service credit in the State Teachers
Retirement System in an amount equal to seventy-five percent of
each year or part of a year, as governed by the provisions of
article seven-a of this chapter, the member worked and contributed
to the Defined Contribution Retirement System.
(b) Effective on the date of transfer, each transferring
member's contribution rate becomes six percent of his or her salary
or wages. Each transferring member who makes a contribution into
the State Teachers Retirement System on or after the first day of
July, two thousand eight, shall be governed by the provisions of
article seven-a of this chapter, subject to the provisions of this
article.
(c) If a member has withdrawn or cashed out all or part of his
or her assets, that member will not receive credit for those moneys
cashed out or withdrawn. The board shall make a determination as
to the amount of credit a member loses based on the periods of time
and the amounts he or she has withdrawn or cashed out, which shall
be expressed as a loss of service credit: Provided, That a member
may repay those amounts he or she previously cashed out or withdrew
within twelve months of the member's reemployment or within twelve
months of the date of transfer, whichever is later, along with interest as determined by the board, and receive the seventy-five
percent service credit as if the withdrawal or cash-out never
occurred: Provided, however, That if the repayment occurs five or
more years following the cash-out or withdrawal, the member also
shall repay any forfeited employer contribution account balance
along with interest determined by the board: Provided further, That
the member shall also have the option of paying the Actuarial
Reserve for his or her remaining service in accordance with the
provisions of section seven of this article to receive full credit
for the cashed-out or withdrawn amounts being repaid.
(d) The board shall take all necessary steps to ensure that
the voluntary transfer of assets authorized by this article does
not affect the qualified status of either retirement plan with the
Internal Revenue Service.
(e) Any service in the State Teachers Retirement System a
member has before the date of transfer is not affected by the
provisions of this article.
§18-7D-7. Optional contribution to receive full service credit.
(a) To receive full credit in the State Teachers Retirement
System for service in the Defined Contribution Retirement System
for which assets are transferred, transferring members shall have
the option to pay into the State Teachers Retirement System the
Actuarial Reserve, as defined in section two of this article. Each
member shall pay the Actuarial Reserve no later than the thirtieth day of June, two thousand nine.
(b) Any member who elects not to pay the Actuarial Reserve
upon transfer to the State Teachers Retirement System pursuant to
this section shall have his or her Defined Contribution Retirement
System service credit reduced by twenty-five percent in accordance
with the provisions of section six of this article.
§18-7D-8. Qualified domestic relations orders.
Any transferring member having a qualified domestic relations
order against his or her defined contribution account is allowed to
repurchase service in the State Teachers Retirement System. The
member shall repay any moneys previously distributed to the
alternate payee along with the interest as set by the board:
Provided, That no alternate payee of an actively contributing
member may transfer to the State Teachers Retirement System. The
member shall repay by the last day of June, two thousand twelve.
The provisions of this section are void and of no effect if less
than seventy percent of the members fail to elect to voluntarily
transfer their assets from the Defined Contribution Retirement
System to the State Teachers Retirement System.
§18-7D-9. Vesting.
If seventy percent or more of the actively contributing
members vote to transfer their assets, then any such member who
works one hour or more after the thirtieth day of June, two
thousand eight, is subject to the vesting schedule set forth in article seven-a of this chapter: Provided, That if a member is
vested under the Defined Contribution Retirement System and his or
her last contribution was not made to the State Teachers Retirement
System, that member is subject to the vesting schedule set forth in
article seven-b of this chapter.
§18-7D-10. Minimum guarantees.
(a) Any member of the Defined Contribution Retirement System
who has made a contribution to the State Teachers Retirement System
after the thirtieth day of June, two thousand eight, is guaranteed
a minimum benefit equal to his or her member contributions plus the
vested portion of employer contributions made on his or her behalf
to the Defined Contribution Retirement System, plus any earnings
thereon, as of the thirtieth day of June, two thousand eight, as
stated by the board.
(b) A member of the Defined Contribution Retirement System who
has made contributions to the State Teachers Retirement System
after the thirtieth day of June, two thousand eight, where such
member has voluntarily transferred his or her assets to the State
Teachers Retirement System, upon eligibility to receive a
distribution under article seven-a of this chapter, shall have at
a minimum the following three options:
(1) The right to receive an annuity from the State Teachers
Retirement System based upon the provisions of article seven-a of
this chapter;
(2) The right to withdraw from the State Teachers Retirement
System and receive his or her member accumulated contributions in
the State Teachers Retirement System, plus regular interest
thereon, as set forth in article seven-a of this chapter; or
(3) The right to withdraw and receive his or her member
contributions plus the vested portion of employer contributions
made on his or her behalf to the Defined Contribution Retirement
System, plus any earnings thereon as of the date of the transfer,
as determined by the board pursuant to the vesting provisions of
article seven-a of this chapter. This amount shall be distributed
in a lump sum.
(c) Any member of the Defined Contribution Retirement System
who voluntarily transfers his or her assets and who makes no
contribution to the State Teachers Retirement System after the
thirtieth day of June, two thousand eight, is guaranteed the
receipt of the amount in his or her total vested account in the
Defined Contribution Retirement System on the date of transfer,
plus interest thereon, at four percent accruing from the date of
transfer. This amount shall be distributed in a lump sum.
§18-7D-11. Due process; right to appeal.
If seventy percent or more of the actively contributing
members elect to voluntarily transfer their assets
, any person
aggrieved by any determination made by the board following the
election, may petition the board and receive an administrative hearing on the matter in dispute. The administrative decision may
be appealed to a circuit court.
NOTE: The purpose of this bill is to provide for the voluntary
transfer of assets from the Teachers' Defined Contribution
Retirement System ("TDC") to the State Teachers Retirement System
("TRS"); to provide an election on the question of actively
contributing members of the TDC voluntarily transferring assets to
the TRS; requiring seventy percent of actively contributing members
of the TDC to vote in the affirmative; to permit the voluntary
transfer of assets upon affirmative vote; providing for
transferring members to receive service credit in TRS for an amount
equal to seventy-five percent of the members' service credit to the
TDC; and providing transferring members the option to receive full
credit in TRS by paying the Actuarial Reserve.
Strike-throughs indicate language that would be stricken from
the present law, and underscoring indicates new language that would
be added. Sections 18-7D-1, 18-7D-2, 18-7D-3, 18-7D-4, 18-7D-5,
18-7D-6, 18-7D-7, 18-7D-8, 18-7D-9, 18-7D-10, and 18-7D-11 are new,
therefore strike-throughs and underscoring have been omitted.